posted October 9, 2008
Republicans blame the latest financial crisis — we've had four in the last 20 years: savings and loan scandal, Internet bubble, the Enron, WorldCom, et.al. and now the mortgage and financial scandal — on Democrats. Yet, three out of the four crises happened with Republicans in the White House.
Conservative economists, like Charles B. Van Eaton, Bryan College, blame politicians, specifically Democrats. Van Eaton says in Sunday's Times Free Press, "Despite the silly charges of greed and malfeasance on Wall Street and arguments that seek to place the blame here or there…" He insists that you cannot blame business, because, "Economics is simple. It reduces to four words: People Respond To Incentives."
Economics, the "Dismal Science," has several assumptions that don't hold up to close examination. The first is people respond to economic incentives only or as their first priority. The second is business people make decisions based on a rational assessment of the situations that confront them. A third is business people will rationally do the right thing and need no regulation. A fourth is people act on self interest—as do all other creatures (Adam Smith, The Wealth of Nations, Chap. 2). We must forgive Smith. Two hundred and fifty years ago scientific observation wasn't done effectively. Many accepted ideas from then have been shown to be wrong. We now know that most species act in cooperative ways and protect the weaker of their species. Also,Smith did much of his observation as a young duke's tutor, not among the working class or the early factories of England.
The first assumption is not always true. Many people act in ways allowing more freedom or control over their lives than possible if they worked only for money. Most micro-business owners (self employed or less than twenty-five employees) and family farmers do so. Many women quit work to raise children versus getting more money. Only a small percent of people are driven primarily by wealth; in standard Engish, the greedy. Many of them are successful because they neither consider other people nor worry too much about the law (they use lawyers to find loopholes) in their quest for money.
The second assumption above is not the norm for many. In business scandals, it usually comes down to the poor judgment of business people who cannot see reality because of their greed. They don't understand they have limited ability, just like the rest of us. They live among like minded people (the true elites) who have someone to take care of the bills, shopping for necessities, etc. They may not know how many houses or cars they own. They don't think of helping others, because in their minds they've never needed help. They don't see servants as helping them? They don't understand how the bottom 90 percent of the population lives. It doesn't occur to them that on a $30,000 a year salary and very few benefits, people cannot afford servants, lawyers or even save money. Daily life takes it all for many people and, in a crisis, then some.
The third assumption above ignores that businesses are run by people who have all the failings of any other group. We have police because people do things to hurt others, either by theft or violence. We have a military because political leaders do things to other countries that are hurtful. Yet we are told that business leaders are different from all other people. They will only be hindered by regulations, which are not needed, conservatives say. If you believe that, I have a bridge to nowhere to sell you. The present situation was brought on by the greed of the corporate leaders and lack of government control over their companies. They went on margin—borrowed multiples of their assets in the belief housing prices never fall. The banks bought and sold bundled loans without any analysis of their worth. Many loans were made to people duped by false advertising. This crisis has nothing to do with actions in 1977 or even in the nineties. The crisis didn't happen then. Too many executives borrowed and invested thirty, forty or more times their assets and gambled they'd never have a problem. But, eventually all gamblers lose.
When you read or hear individuals defend Wall Street tycoons, check out who those defenders are. Do they make their money from this corrupt system or are they rich themselves? Are they a fervent true believer in open markets or Republicans trying to shift the blame? Almost all of them fit into one of these four groups. It's better to listen to Warren Buffet or someone like him. Buffet is the world's richest man, but he lives in a house he bought in 1971 for $150,000. It isn't shabby, but it's not a mansion. He is one of the few leaders today who rationally considers where and when he invests and doesn't gamble. He's misjudged, but not due to greedy gambles. Buffet doesn't support the system as it is.
The Republican Party supported open markets and reduced regulation for many decades. They passed bills to benefit many corporations, who then donated directly or indirectly to various Republican candidates, the GOP or to various PACs and other groups supporting the Republicans. They tried to turn DC's K Street into a Republican fiefdom. They ran the national debt up from $500 billion to almost five trillion under Reagan and G.H.W. Bush and about that much under G.W. Bush. (Clinton-Gore reduced the deficit and the size of government.) Republican's increased the number and total amount of earmark "pork" for five consecutive years. They aren't fiscally responsible.
When McCain says he's a maverick, it just doesn't go along with his record overall. Sometimes he has bucked Bush and the GOP, but 80 percent of the time he's backed them. He's changed his past maverick position on several crucial issues to gain GOP support for this election. Check it out. After all, it's your money.
Roger A. Meyer, PhD
* * *
I believe it was under Clinton's administration that the whole mortgage thing started getting out of hand. Since the Democrats have had control of the House of Representatives and have not allowed legislation to go through that would regulate Fannie Mae and Freddie Mac, I would say they should own up to their share of the responsibility.
Since Dodd received the most amount of money from these two entities and Obama received the second most amount from them, I think we can safely say these two politicians are deeply entrenched in this mess.
Since Obama was involved with ACORN as a lawyer who would go around threatening banks not willing to give mortgages to destitute people who would never be able to pay their mortgages, I think we could say that Obama does not have clean hands in all of this.
Yes, the Republicans have not held to their conservative values while in office and probably deserve to be thrown out, but remember the Carter years, a Democratic President, a filibuster, Democratic Senate, and a Democratic House. If that doesn't send a shiver down your spine, you might be brain dead.
Rachel Miller
Signal Mountain
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